Despite a surge in gold prices last year, physical demand for gold fell precipitously. But we think that a brighter economic outlook will boost consumer demand this year and help to prop up the gold price . Total demand for gold fell in 2020, largely due …
2nd February 2021
While Japan’s vaccine rollout won’t begin until late February, we are assuming that inoculations proceed rapidly enough for most of the vulnerable to be protected by the middle of the year with the result that the economy returns to pre-virus levels in Q3 …
By bringing large off-balance sheet expenditures back into official spending plans and setting more realistic targets for revenues, the Finance Ministry has presented a more credible Union Budget for FY21/22 than has been the case for several years. While …
The RBA today upgraded its labour market forecasts but noted that the recovery remained dependent on “significant fiscal and monetary support”. Indeed, the Bank extended its Bond Purchase Program by another $100bn and indicated that it won’t raise …
The volatility caused by retail investors co-ordinated on the r/Wallstreetbets forum does not pose a direct threat to the global economy, but it does illustrate some of the financial vulnerabilities that can stem from ultra-loose monetary and fiscal …
1st February 2021
Manufacturing PMIs from emerging markets generally rose last month, underscoring that industrial sectors should continue to weather renewed outbreaks and restrictions in the coming months. But China’s manufacturing PMIs fell, providing further evidence …
The global manufacturing PMI survey for January suggests that the industrial recovery lost a bit of steam at the start of the year. It also provided some evidence that, in addition to lengthening supplier delivery times, supply-chain disruptions and …
The latest fall in China’s manufacturing PMI readings is a further sign that its economy is slowing. Nevertheless, activity there, and elsewhere in Asia, remains strong and we think that it will hold up well in the near term, which should support …
In this Update , we take stock of the key elections that are scheduled around the world in the coming year and discuss the implications for economic policy. While elections in advanced economies are unlikely to produce any decisive changes in direction, …
Differences in rental prospects and risk premia confirm our view that, despite looking overvalued compared to government bond yields, there is still scope for larger falls in industrial yields in the German markets compared to most southern European …
India’s Finance Ministry set aside the desire for near-term fiscal consolidation and today announced significant stimulus in the FY21/222 union budget. That should support the economic recovery over the coming quarters, albeit at the cost of putting …
Despite the ongoing economic uncertainty, we expect that global demand for meat and animal feeds, such as corn and soybeans, will rise over the next few years . During the last global recession, consumers in the advanced world switched away from expensive …
29th January 2021
January’s surprisingly large increases in inflation in Germany and Spain were due to a range of factors, including a rise in VAT, higher energy and holiday prices, and methodological changes. As a result, inflation is likely to be higher than we had …
The final few months of MSCI monthly data for 2020 suggest that the fall in capital values last year was not as bad as we anticipated. But we still think a prolonged period of tight restrictions and the end of the eviction ban will mean that values fall …
The Bank of Canada has signalled that it will wait until 2023 to raise interest rates and, despite our stronger forecasts for GDP growth, there are a few reasons why we expect it to stick to this pledge. Last week the Bank reiterated that it will “hold …
28th January 2021
We think that coffee prices will be among the few agricultural commodity prices to rise in 2021, not least because a relaxation of COVID-19 restrictions should boost out-of-home consumption . After falling in the first half of 2020, the prices of almost …
We expect household incomes to rise in most countries this year as easing restrictions allow people to get back to work. The outlook for incomes is brightest in North America, particularly given the likelihood of further fiscal transfers in the US. But …
A healthy economic backdrop, favourable supply conditions and the potential for a post-Brexit boost mean that we forecast Dublin industrial rents to keep growing at around 2% p.a. over the coming years. 2020 proved to be yet another solid year for …
The Fed acknowledged in its post-FOMC meeting statement today that the economic recovery weakened in the final couple of months of last year, but balanced that near-term pessimism with greater optimism that vaccines had reduced the medium-term risks to …
27th January 2021
We expect the boost in demand for life science product will support Boston’s office market. At the same time, office-to-lab conversions will limit the impact of a relatively large development pipeline, reducing the downside for Boston in the coming years. …
Higher prices and a backlog of uncompleted wells should ensure that US crude oil production edges up slowly over the next couple of years. But with many of the challenges facing the sector still lurking in the background, we remain doubtful that …
The economic recovery in Dubai is going to be put on ice as a worsening COVID-19 outbreak results in increased precautionary behaviour and tighter containment measures. But if the strong start to the vaccine rollout continues, most restrictions will …
We estimate a backlog of around 850,000 foreclosures will have built-up if the ban is extended until the end of September, similar to the peak seen during the financial crisis. However, not all those foreclosures will be processed in the final quarter of …
We think that the recent rally in emerging market (EM) Asian equities outside of China will slow substantially this year, and that they will begin to underperform other EM equities. To recap, a key feature of global equity markets since November’s vaccine …
New restrictions on travel will disrupt Lunar New Year plans for many families in China but they should also reduce the disruption to manufacturing and construction that normally causes output to slump in the first quarter of the year. The new government …
The rebound in market-based inflation compensation measures will not alarm the Fed since expectations are still relatively muted. Instead, Fed officials are more likely to view the rise as a welcome vindication of the tweaks they made to the policy …
26th January 2021
The recent rise in inflation appears to have stayed the hand of Nigeria’s central bank from delivering more monetary easing at today’s MPC meeting. But, as price pressures drop back towards the end of this year, we think that policymakers will lower the …
While we have revised up our end-2021 forecasts for the Australian dollar and the New Zealand dollar against the US dollar to reflect the strength of their recent rallies, we still think that the Kiwi will outperform the Aussie over the next couple of …
25th January 2021
Although much of 2020’s fall in Norwegian government bond yields has been reversed, we think that improving economic activity and supportive valuations will allow prime office yields to reach new historic lows this year. Despite the hit to economic …
Our base case remains that the RBA will end quantitative easing in April. However, one risk to that forecast is the rising share of long-term unemployment. According to estimates by both the RBA and the OECD, the natural rate of unemployment rose after …
The relative valuation of the US stock and corporate bond markets is another piece of evidence against the idea that equities in general are currently in a bubble. Their relative valuation today contrasts with the situation before collapses in the stock …
22nd January 2021
Leisure and hospitality re-openings were behind the strongest job growth in the Autumn, although national data for December suggest that this could be reversed on the back of renewed lockdowns. With the sector still well short of previous peaks, we think …
The flash PMIs for January suggest that the US economy shrugged off containment measures at the start of 2021, but that restrictions did indeed weigh on activity elsewhere in DMs. The surveys also provide some evidence that supply shortages are exerting …
The number of new Covid-19 cases is surging once again in Spain and, with tougher measures looking inevitable, this will weigh heavily on economic activity in Q1. Things should improve later in the year (perhaps dramatically), but only if the vaccination …
While the yield of ten-year Italian government bonds has risen recently, we continue to expect it to fall back by end-2021 thanks to ECB support and a benign domestic and global backdrop . To recap, there appear to be three main reasons behind the ~20bp …
While yesterday’s ECB policy statement and press conference left many investors with the impression the Bank may be willing to tolerate higher peripheral bond yields, we doubt that this is the case. Either through words or action, the Bank is likely to …
The possible sharp fall in the population since the start of the pandemic may explain up to 1.8 percentage points of the underperformance of the UK economy last year relative to its peers and, more worryingly, may present a downside risk to our forecast …
21st January 2021
With risk-free interest rates not set to drop any further, and home sales constrained by record low inventory, the cost of the prepayment option on MBS will have fallen. Alongside Fed purchases of MBS, that helps explain the recent narrowing in the spread …
As expected, the ECB left its policy settings unchanged today and, given the flexibility of its current policy of implicit yield curve control, will probably make no changes until the second half of the year. However, we suspect that the Bank will allow …
The main risks to the outlook for emerging markets this year relate to virus developments and vaccine rollout. (See here and here .) The more traditional macro risks are smaller, but one going under the radar in a few large EMs is that fiscal support …
Policymakers in South Africa looked through the recent virus-related deterioration in economic conditions and kept the policy rate unchanged, at 3.50%, today. As the recovery struggles to gain momentum, monetary conditions will probably stay loose for …
Turkey’s central bank left its benchmark one-week repo rate unchanged at 17.00% at today’s MPC meeting as concerns about the faltering economic recovery took priority. But the hawkish tone on inflation supports our view that rates will be unchanged …
As expected, the Norges Bank left its policy rate on hold at a record low of zero once again this morning and reiterated that it “will most likely remain at today’s level for some time ahead”. This supports our view that, while we expect Norway to be …
Bank Indonesia (BI) today left its main policy rate unchanged at 3.75%, but we doubt this marks the end of the central bank’s easing cycle. With the economic recovery struggling, inflation below target and the currency holding up well against the US …
The Brazilian central bank’s decision to remove its forward guidance at last night’s meeting indicates that Copom is preparing the ground to raise interest rates. But we doubt that policymakers will deliver the aggressive tightening cycle that most …
Despite the softness in occupier activity, prime office rents in the French capital grew at a healthy pace in 2020. And with the labour market set to recover in the second half of this year and a tight supply picture, we think that Paris rental growth has …
Despite the headwind from the third virus wave, the Bank of Japan revised up its growth forecasts for the next couple of fiscal years. And while Governor Kuroda didn’t provide much insight into what to expect from the upcoming review due in March, we …
The main change to the Bank of Canada’s policy statement today was a signal that the pace of its bond purchases will be reduced as the Governing Council gains confidence in the strength of the recovery. As well as keeping the policy rate at 0.25% and …
20th January 2021
The rollout of COVID-19 vaccines has slowly picked up across the region and we think governments will ease most restrictions by the middle of this year. But there is a clear risk that vaccine rollout progresses more slowly and that the bar for easing …
The surge in narrow money growth is entirely due to regulatory changes and a substitution out of savings accounts due to low interest rates. (See Chart 1.) Our measure of M3 shows broad money growth has slowed, dampening fears that a surge in money will …
